HKSAR v. HO KIN HANG, KENNETH

CACC 152/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 152 OF 2005

(ON APPEAL FROM DCCC NO. 1025 OF 2004)

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J U D G M E N T

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Introduction

1. The applicant, Ho Kin-hang, Kenneth faced a total of 20 charges, being Charges (1) to (20), and was tried before Judge Toh in the District Court together with another person, the 2^nd defendant (“D2”), who faced six charges, namely, Charges (21) to (26). 

2. On 18 March 2005, the judge acquitted the applicant of Charges (1) to (8) and D2 of Charges (21) to (26).  Charges (1) to (8) were offences contrary to sections 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap 201, alleging against the applicant, being an agent, for accepting or soliciting an advantage from D2, as an inducement to or reward for or otherwise on account of the applicant doing or having done an act in relation to his principal’s affairs or business, namely inviting Growinet Limited, owned by D2, to submit quotations for the projects handled by the applicant’s principal, RHK Design Limited (“RHK”).  Charges (21) to (26) were also corruption charges against D2 and they mirrored some of Charges (1) to (8) laid against the applicant.

3. Charges (9) to (20) were different offences, contrary to sections 9(3) and 12(1) of the Prevention of Bribery Ordinance.  These 12 charges were laid against the applicant for his being an agent, using documents with intent to deceive his principal.  The documents alleged in these charges to have been used by the applicant to deceive his principal, RHK, were quotations for work or services to be performed by contractors employed by RHK.  Charges (9) to (18) involved two companies named “Au Mei” owned by the same proprietor, which did work and provided services to RHK.  Charges (19) and (20) involved quotations from two other companies.  The quotations contained prices that had been inflated or marked-up over the actual or genuine prices charged by the contractors.

4. At the conclusion of the trial, the judge found the applicant not guilty of Charges (1) to (8) and D2 not guilty of Charges (21) to (26).  She, however, found the applicant guilty of Charges (9) to (20).  She passed a sentence of two years’ imprisonment on the applicant on each of Charges (9) to (18), to run concurrently.  She also passed a sentence of two years’ imprisonment on Charge (19) and Charge (20), with one year of each of the sentences to run consecutively to the sentence imposed on Charges (9) to (18).  The total of the sentences therefore came to 4 years’ imprisonment.  The judge also ordered the applicant to pay back to RHK the total amount of $129,456.30 within 1 month from 18 March 2005.

5. The applicant now seeks leave to appeal against both conviction and sentence.

Background facts

6. I will briefly state the background facts for an easier understanding of Charges (9) to (20) of which the applicant was found guilty by the judge.  The following facts were admitted by the prosecution and the applicant pursuant to section 65C of the Criminal Procedure Ordinance, Cap 221:

(a)	At all material times, the applicant was the project manager of RHK.  He and his wife were the directors of Golden Flow Associates Limited (“Golden Flow”) at all material times.
(b)	RHK was an interior design company providing clients with a one-stop service, including design, space planning and project management by coordinating the work of various sub-contractors.  The applicant was responsible for liaising with and obtaining quotations from sub-contractors of RHK for costing, and supervising their work at sites.

7. Regarding these 12 charges, the judge described:

“The modus operandi was similar in all these charges in that the defendant [the applicant] would overstate or cause the quotations to be overstated by these contractors and the overstated amounts would be given to him at the end of the day.” (Appeal Bundle p 104)

Grounds of appeal

8. The applicant’s complaint against sentence is that it was too heavy, especially in view of the fact that the total amount involved of about $130,000 was not too substantial.  From what is to be made apparent below, I will focus on the grounds against conviction.

9. A number of the applicant’s grounds of appeal against conviction revolve around his defence intimated in cross-examination of the prosecution’s witnesses; he did not testify before the judge. 

10. His case was that although he was employed as a project manager by RHK, he had assumed another role, that of a main contractor of RHK, which role and interest were independent of that of his employee’s capacity as the project manager.  He asked the contractors who would submit quotations for work and services to be performed for RHK to inflate the prices so as to cover his service as a main contractor.  In this connection, he challenges the evidence of PW1 and PW2, who were directors of RHK, admittedly the principal of the applicant, of their absence of knowledge of his alleged role of a main contractor and the services provided by him to RHK as such.  He contends that the judge should have accepted it as a standard practice of the construction and decoration trade that the main contractor must require some additional fees to perform his job and such fees must be added on top of the price quoted by various contractors so as to fund the expenses to be borne by the main contractor, such as to pay the costs for transportation, removal of debris, rewiring and touch-up work.  He also contends that the judge had erred in rejecting the evidence of the work and services, such as providing drawings etc that had been provided by him for fees which were covered by the inflated amounts in the contractors’ quotations to RHK. 

11. He also challenges the evidence of PW1 and PW2 of their absence of knowledge of the inflated prices, and submits that the evidence demonstrated that they had expressly or impliedly authorised him to ask contractors to inflate the quoted prices.  He alleges that these two witnesses were dishonest persons and their evidence should not have been accepted by the judge. 

12. He asserts that the judge erred in disregarding the “evidence” of D2 in the records of D2’s statements made in interviews with ICAC officers that supported his defence.

13. He also complains that his counsel at trial had not fully apprehended his case and had not fully and correctly presented it to the court. 

Acquittal

14. In her Reasons for Verdict, the judge explained why she found the applicant not guilty of Charges (1) to (8), and D2 not guilty of Charges (21) to (26).  She was not satisfied that the amounts paid or sought to be paid by D2 to the applicant were for the purpose as alleged in the particulars of offence of these charges.  She placed no weight on the interview records of D2 to the ICAC regarding his admissions of paying the amounts to the applicant as kickbacks. 

Conviction

15. The judge accepted the evidence of PW1, the managing director of RHK, and PW2, the other director of RHK.  PW1 disagreed that the applicant had dual roles, that is an employee of RHK and also a main contractor of RHK.  PW2’s evidence was that the applicant was not to assume the role of contractor providing services to RHK.  PW2 was adamant that RHK employees were not allowed to solicit or accept advantages in respect of RHK’s affairs.  She did not know that the applicant owned Golden Flow, to which the excess between the inflated prices and actual quoted prices had been paid.  She disagreed that RHK gave the applicant permission to moonlight by providing services to other contractors.  The judge also pointed out that the defence submission that the payments of such excess from the contractors were for genuine services provided by Golden Flow was not substantiated by any evidence.

Main contractor and extra services

16. The defence case appeared to be that apart from being an employee in the position of project manager of RHK, the applicant was providing services to RHK and the contractors as the main contractor.  The services were alleged to include providing drawings and, in respect of Mr Ng (PW5), the proprietor of Au Mei, of translation services which was necessitated by the fact that PW1 and PW2 did not speak Chinese whereas Mr Ng did not speak English.  The judge dealt with the evidence that drawings were usually provided by RHK although sometimes, RHK would require drawings from contractors, for example, the specialist contractors for cable wiring, which were called shop drawings or site drawings. 

17. On this aspect, the judge said:

“… these so-called extra services in the form of translation, drawings, explanation of works is clearly always in the ambit of the defendant’s job description as project manager of RHK.  As both PW1 and PW2 said, they both relied on the 1^st defendant to communicate effectively with the contractors.  RHK had their own draftsmen to draw plans and it was up to the defendant to explain to the contractors what is required of each of them in order for RHK to obtain quotations from these contractors, and then as project manger, it was the 1^st defendant’s job to oversee these contractors and co-ordinate their work.

… There is no evidence that the drawing supplied by the 1^st defendant was extraneous of those RHK had to provide to Au Mei.” (Appeal Bundle pp 94-95)

The defendant or 1st defendant mentioned in the passages cited referred to the applicant.

18. It is thus clear that the judge had considered the applicant’s case regarding his alleged role and work as a main contractor and dismissed it in her Reasons for Verdict.  Subject to the matters referred to below, there seems to be nothing wrong in the judge’s conclusions, simpliciter, in this regard.

D2’s out-of-court statements

19. There is, however, a point made by the applicant in his grounds of appeal which must be examined.  The applicant puts the point in this way:

“While the judge disapproved the method adopted by the ICAC people in deducing [sic] evidence from D2, the same evidence used to acquit D2 was directed and could not be used in D1’s case.  In D2’s evidence, it clearly showed that there were extra services provided/work done by D1 to D2.”

20. On the other hand, on behalf of the respondent, Mr Alex Lee submits that the acquittal of the applicant and D2 on the other charges has nothing to do with the propriety of the convictions under Charges (9) to (20), because the acquittal was not caused by the judge’s belief that the applicant had done any extra work for D2.

21. The relevant passage in the judge’s Reasons for Verdict is as follows:

“

17.

Mr Chung in his submissions on behalf of the 1st defendant also sought to rely on ‘evidence’ of the 2nd defendant.  The 2nd defendant never gave evidence and what he said in his video interview records cannot be used as evidence either for or against the 1st defendant, but in any event I will be dealing with that at the end of my verdict.” (Appeal Bundle p 90)

22. At the end of the Verdict, the judge stated that she did not give any weight to the answers given by D2 in these two interview records because:

“these two interview records are classic examples of how an interviewing officer should not conduct the questioning of an accused.” (Appeal Bundle p 100)

23. The judge described the interrogation technique adopted by the officer that it was in the form of telling D2 that the officer found the answers given by D2 unacceptable and wanted a more acceptable explanation.  The unacceptable answers were that the percentage of the inflated quoted price given to the applicant by D2 was for the applicant’s provision of services, ie the applicant would prepare the engineering diagrams, and that D2 considered it was a proper commercial activity. 

24. After the interrogation, D2 agreed with the question put by the officer:

“… I still believe that Ken Ho [the applicant] just made use of the company Golden Flow, just gave any excuse to claim that it was a drawing fee in order to collect 10 per cent of the business turnover concluded by your company for his personal advantages.  Do you agree to my words?” (Appeal Bundle p 102)

25. While the judge had placed no weight on D2’s answers in the two interview records, apparently such answers related to those which were incriminating to D2.  The judge might also have placed no weight on the exculpatory answers.  But because she had expressly said what D2 said in his video interview records “cannot be used as evidence either for or against the 1^st defendant”, she had obviously not considered the exculpatory answers (including those referred to in para 23 above) which might support the applicant’s case that he provided extra services/work to the contractors in Charges (9) to (20) for the services he rendered in the context of a main contractor. 

26. The judge’s ruling that D2’s interview records were not evidence against or for the applicant was obviously based on the rule against hearsay.  D2 did not give evidence before her and thus whatever D2 had said out of court was not admissible as evidence relating to the applicant.  However, there appears to be an exception to the hearsay rule, which is that if defendant A had made an out-of-court statement incriminating himself which would or might exonerate defendant B, then the statement is admissible.  See Archbold Hong Kong 2005, p 765 para 11-13 and R v Myers [1998] AC 124.

27. While the point taken by the applicant does not seem to be covered by the exception, because it is not the part of D2’s statements incriminating D2 on which the applicant seeks to rely, I consider it appropriate, however, for leave to be granted for the applicable law and facts to be fully argued before the Court of Appeal.

Veracity and reliability of the evidence of PW1 and PW2

28. The applicant attacks the veracity and reliability of the evidence of PW1 and PW2, his bosses in RHK, whose evidence the judge accepted.  This kind of attack would not normally be fruitful, for this Court would in most cases defer its view on such matters to that of the trial judge who has the advantage over this Court of receiving the evidence first-hand, with an opportunity of seeing and hearing the witnesses giving evidence.

29. In this case, however, the applicant has in his typed submissions consisting of no less than 50 pages, set out passages in the trial transcript of witnesses’ evidence in support of this ground.  On the evidence to which he has referred, it seems to me that the following grounds raised by him may arguably find support. 

30. From the documents seized by the ICAC from RHK’s offices, such as purchase orders or documents containing the notation of “actual”, “credit difference” or “special discount”, and especially where such documents bore the signatures of PW2, who was responsible for costing of the works undertaken by or under RHK, a reasonable doubt may be raised to show that PW2 had knowledge of certain marked-up prices quoted by the contractors.  This point is also supported by the admissions of PW1 and PW2 that RHK made profits over and above the amount of percentage fee charged by RHK (as stipulated in contracts between it and the project owner, the end-user) based on the amount of construction cost billed to the project owner.  PW2 agreed in her testimony that in most cases RHK would charge a percentage on top of the contract sum (for the works) as RHK’s design and management fees.  At pp 69-70 of the trial transcript, PW2 is shown to eventually agree that RHK required the contractors to bill RHK the original sum before being inflated, and RHK only paid the contractors that uninflated sum.  She agreed that RHK would try to earn another 3 to 5 per cent more and the applicant was asked to deal with the contractors in respect of the inflated quotations and get them to accept the discount.

31. The evidence of DW1, a retired government official called by the applicant, was that relating to a construction contract for ASTRI funded by the Government, RHK was entitled to charge the percentage stipulated in the contract, but was not allowed to earn anything more.  The applicant also relies on DW1’s evidence to support his allegation that PW1 and PW2 were dishonest and not reliable. 

32. Mr Lee draws my attention to the fact that DW1’s evidence did not relate to any of the quotations which were the subject matters of Charges (9) to (20) or to any of the projects in question.  There seems to be no dispute over this. 

33. However, the applicant relies on DW1’s evidence and RHK’s practice of getting inflated quotations from contractors as a discount in at least two ways.  First, that practice had the effect of enabling RHK to make secret profits from the end-users, which was not allowed by the contractual terms between them and RHK.  That was dishonest.  The practice would have increased RHK’s profits by enlarging the basis for RHK’s percentage fee and for RHK to pocket the difference between the inflated price and the genuine price.  PW1 and PW2’s evidence should have been examined in this light, but the judge had not done so.

34. Secondly, the applicant was the only person in RHK who was responsible for liaising with contractors and in view of the admissions of PW1 and PW2 that sometimes RHK made profits over and above the contract stipulated percentage fee and PW2’s admission that the applicant was asked to liaise with contractors to obtain inflated quotations as a discount from them, a reasonable doubt is created in that applicant’s acts of asking contractors to inflate the quoted prices had been known to RHK or had been expressly or impliedly authorised by RHK, his principal, especially in cases where PW2’s signatures appeared on the documents bearing the marked-up prices.  Thus PW1 and PW2’s testimony to the effect that they were misled or deceived by the documents referred to in the charges may reasonably be doubted, undermining the ingredient of “with intent to deceive” required to be established for the 12 charges.  It should be noted that on the basis of RHK’s usual earnings being a percentage of the total construction cost (sometimes called the contract sum for the end-user), any inflated quotation made by a contractor would only have increased RHK’s profit and would not in anyway operate to its detriment financially.

35. It does not appear that the judge had dealt with these significant matters and the implications from them in the Reasons for Verdict, save that in para 12 of the Reasons she appeared to have simply accepted PW2’s evidence of PW2’s disagreement with the proposition that RHK permitted the applicant to moonlight by providing services to contractors in return for the applicant asking contractors to mark up the quotations for RHK.  I therefore come to the view that leave should be granted to enable the applicant to argue this ground of appeal before the Court of Appeal. 

Conclusion

36. In the circumstances, I grant leave to appeal against conviction to the applicant.  To be fair to the applicant, the leave granted is not restricted to any particular ground of appeal.

Sentence

37. It is unnecessary for me to deal with the propriety of the sentence in view of my granting leave to appeal against conviction, because whether the sentences will stand depends, first and foremost, on the success or otherwise of the applicant in his appeal against conviction.  The application for leave to appeal against sentence can be considered by the Court if it dismisses the appeal against conviction.